Tejas Judge Blocks Co-Founder Gorman’s Bid for CEO Post

Aug. 1 (Bloomberg) -- A judge temporarily blocked John
Gorman IV, a Texas bond salesman with an exotic-animal ranch,
from taking over as Westech Capital Corp.’s top executive in a
fight for control over the parent of Tejas Securities Group Inc.

Delaware Chancery Court Judge John Noble issued an order
yesterday confirming current Westech Chief Executive Officer
Gary Salamone in the top job at the distressed-debt firm while a
lawsuit over Gorman’s bid is pending. Noble also granted
Salamone’s request for a “status quo order” to allow Tejas to
operate normally during the litigation.

“At some point, we’re going to have to come together to
get a resolution of all of this,” Salamone said in a telephone
interview. “I don’t know what Mr. Gorman thinks he’s going to
accomplish at the end of the day.”

Salamone sued July 10, saying Gorman, co-founder and
controlling shareholder of Austin, Texas-based Westech, is
wrongfully seeking to amend company bylaws to allow shareholders
to remove directors and executives. Gorman is misusing that
amendment to seek Salamone’s ouster both as CEO and as a Westech
director, according to the suit.

Gorman declined to immediately comment on Noble’s ruling
because he said he hadn’t seen the decision. He had appointed
himself CEO by citing his authority as majority shareholder,
according to a July 7 letter to employees. Salamone said an
earlier ruling by Noble left him in charge.

Earlier Ruling

The Delaware judge ruled May 30 that Gorman failed to honor
a voting-rights agreement by installing his slate of Westech
directors and improperly removed an existing board member. That
decision has been appealed to the Delaware Supreme Court.

Noble’s ruling left the seven-member board with only four
validly elected directors, including Gorman and Salamone. The
judge also found Gorman acted in accordance with the agreement
when he ousted another director and named an ally to the board.

Noble’s ruling in May didn’t resolve the question of who
controls Westech and Tejas, Salamone said. He has requested
Noble appoint a custodian to break the board deadlock.

Gorman owns more than 2.4 million shares, or 59 percent of
Westech’s common stock, along with about 51 percent of the
holding company’s preferred shares, according to court filings.
In a January interview, he said he had hosted fundraisers in
Austin for Texas Governor Rick Perry and then-Senator Barack
Obama.

He breeds exotic animals such as oryx and wildebeest at his
R Bar C ranch outside the city.

Wine Auctions

In the earlier case, some Tejas employees and a former
Westech director claimed Gorman’s trading losses and extravagant
spending forced the firm to undertake an $8.5 million
recapitalization.

Gorman denies the wasteful-spending allegations, saying he
invested $15 million in the company and never took a salary or a
dividend. In the January interview, he said he donated millions
of dollars to private schools and charity wine auctions and
helped the city of Austin expand its hiking and biking trails.

The bond salesman sued Salamone and ex-Westech Director
Robert Halder in state court in Austin earlier this month,
seeking to have a Texas judge ratify his move to oust Salamone.

Gorman claimed Salamone and others refused to recognize his
“status as CEO and have denied him access in any capacity to
the company’s premises, employees, books or records,” according
to court filings.

Salamone and Halder countered that Gorman’s move to amend
the company’s bylaws violates Delaware law and the voting
agreement created as part of the recapitalization deal.

Status Quo

In his status quo order, Noble reaffirmed the current
Westech directors were Gorman, T.J. Ford, Salamone and Michael
Dura. Given the board’s split alliances, the finding “appears
to have had the unfortunate result of creating deadlock on
Westech’s board,” the judge said.

Noble has ordered Westech and Tejas officials to operate
“in the ordinary course of business” in connection with
spending or transferring funds and to preserve records,
according to court filings.